This document discusses experiences in improving the fiscal health of local bodies in India. It notes that while there are some success stories of improved property tax collection in cities like Vishakhapatnam, Bruhad Bangalore, Surat and Mumbai, overall the impact on municipal finances has been minimal. Most urban local bodies remain highly dependent on government grants and transfers and have weak financial profiles. The document calls for frontloading fiscal reforms, improving incentive structures and documentation of success stories to motivate more local bodies to undertake fiscal health improvements.

1. Experiences in
Improving Fiscal Health
of local bodies in India
Dr. Ravikant Joshi
Reimagining Inclusive Cities
International Symposium: Planning. Land. Housing. Infrastructure.
15-16 Nov 2018 | The Leela Palace, Chennai, Tamil Nadu, India

2. Experiences in Improving Fiscal Health of local
bodies in India – Old and New Stories
Vishakhapatnam –
Property Tax
Bruhad Bangalore –
Property Tax Surat – User Charges
Mumbai – Capital
Value PT
72 ULBs of
Telangana –
Property Tax
Ujjain – Property Tax –
Not reported
Recent Fiscal Health Improvement Efforts
Raipur – Property Tax
– Not reported
Ranchi - Property Tax Bhubaneshwar -
Adv Tax
Nashik –Property Tax

3. Experiences in Improving Fiscal Health of local
bodies in India - Issues
• Improving fiscal health of local bodies barring some exceptions has
not received due importance, necessary support and suffers from
various issues -
• Lack of data / documentation about such experiences,
• Failure to report/document experiences in improving fiscal health of ULBs,
• But real fact is, there are very few experiences in improving fiscal health of ULBs
• As Fiscal Health Improvement initiatives are few, they failed to have impact on
overall municipal finances in India.
• Lack of consistency – sustainability
• Lack of eco systems including incentive system to sustain such reform initiatives
• Lack of mass replicability

4. Experiences in Improving Fiscal Health of local
bodies in India – insignificant impact
• Very difficult to assess impact of fiscal health improvement efforts
• But Macro data, which is also dated now, suggests miniscule impact
of such efforts -
• Funding of Cities through national and regional sources increased to 49 per cent
from 37 per cent during 2002-2012.
• Municipal tax revenue to GDP ratio declined from 0.39 to 0.32 per cent
• Municipal non-tax revenue to GDP ratio declined from 0.20 to 19.8
• With abolition of Octroi now even in Gujarat and Maharashtra ULBs’ minimum
dependence on devolutions is more than 65 per cent.

5. Experiences in Improving Fiscal Health of local bodies
in India – Insignificant impact, Inadequate efforts
Credit rating (mid 2008) Credit rating (2017)
Rating
Category
No.
Cities
%
Share
Financial health implication No of Cities % Share
AAA -- 20 cities
31.7 %
No ULB in this category 34 cities
7 %
AA 10
A 10
BBB 18 42 cities
66.6 %
weak financial profile, high dependence on government
grants/transfers
127 cities
27 %
BB 17
negative operating surpluses, limited ability to borrow or service
debt
B 07 inadequate and volatile grant support
C 01 1.6% In no position to repay debt. 362
Total 63 463

6. Experiences in Improving Fiscal Health of local bodies
in India - Insignificant impact, Inadequate efforts
• Annual Survey of India’s City Systems (26 cities) Report by Janaagraha states that -
• 54 % cities do not generate enough revenue to meet their salary costs
• 39 % is the average percentage of own revenues to total expenditure
• 70 % cities had budget variances of over 30%
• Extensive web search showed that cyber world is full of age old success stories of
improving fiscal health by few urban local bodies which we all know
• But there is a total absence about newer success stories about fiscal health
improvement by local bodies in virtual or print literature
• It does not mean that there are absence or no fiscal health improvement efforts –
very recent one which received HUDCO award this year is property mapping and
revenue improvement in ULBs of Telangana

7. Experiences in Improving Fiscal Health of local
bodies in India – Telangana Property Tax Efforts
• Commissioner & Directorate of Department of Municipal Administration
Government of Telangana mapped existing 12.5 lakh property assessments of 72
ULBs.
• 18000 new / unassessed properties were also mapped.
• geo-spatial data and tax data of these properties has placed online.
• Using this data property tax was rationalised in 34 ULBs resulting in an increase of
28% of the property tax collected (to the tune of Rs. 40 crore)
• Lets hope this initiative reaches logical end and sustains itself in the future

8. Experiences in Improving Fiscal Health of local
bodies in India - Way Forward
• Front Loading of Fiscal Health Reforms – should become part of
prequalification norms for ULBs to receive funding /grants
• Strong incentive structure to motivate ULBs to undertake fiscal health
improvements
• Separate line of credit/funding for fiscal reforms by ULBs
• Doing away with soft budgetary constraints approach while
devolving funds

9. Experiences in Improving Fiscal Health of local
bodies in India - Way Forward
• Creation of appropriate eco systems
• Creation of centralised IT Platform/web portal and institutional
structure for documenting, reporting, analysis and sharing of fiscal
health improvement success stories of ULBs
• Creation of independent financial performance ranking system run
by GOI
• Creation of annual credit rating of ULBs putting that data in public
domain
• Regular statutory and performance audit of ULBs by designated
agencies and publication of audit report on centralised Web portal

10. Experiences in
Improving Fiscal Health
of local bodies in India
Thank You